Gothenburg races to find room for expansion

Gothenburg is blossoming after its industrial transformation, and the race for space is on. Real estate opportunities exist despite some resistance to overseas investors, as Sebastian Shehadi reports.

Gothenburg’s story is one of industrial transformation. The city is Sweden’s second largest in terms of population and real estate market share. In 2017 it accounted for 12% of the country’s property transaction volume, growing from SKr3bn to Skr16bn ($345m to $1.84bn) over the past eight years.

Gothenburg’s shipbuilding industry went into decline in the 1970s. Following years of soaring unemployment, Gothenburg began its transformation into a knowledge-based city with the creation of a science park in 1999. With 24,000 workers and more than 400 companies, the park employs more people than the shipyards ever did.

Recent years have seen a growing focus on Gothenburg’s automotive industry, which seemed doomed only 10 years ago. The city is now a leader in specialised digital systems. Volvo Group, the biggest company in Sweden and now owned by China’s Geely, is headquartered in Gothenburg. Geely’s innovation centre employs 2000 staff.

Gothenburg also boasts big names such as SKF, the world’s largest bearing manufacturer, and pharmaceutical giant AstraZeneca, whose research centre employs 2700 researchers.

Hungry for real estate

With such strong economic growth in Gothenburg, demand for office space is huge: indeed, some companies are moving away because they cannot expand, says Andreas Gothberg of Business Region Göteborg. As is the case in Stockholm, there is an undersupply of affordable housing and a large number of luxury homes. As many as 200,000 Gothenburgers are in the queue for affordable homes.

Gothenburg has grown by 170,000 people and created 134,000 jobs since 2000, impressive numbers even by European standards. Contributing to this is the city’s excellent land and sea connectivity. Gothenburg was named the best logistics location in Sweden for 16 consecutive years by trade journal Intelligent Logistik.

The city municipality is investing €100bn in housing, offices and infrastructure. Some €30bn is going towards the River City project, one of the biggest city centre development projects in Europe. Due to be completed by 2035, River City will double the size of central Gothenburg by creating 25,000 apartments, 50,000 new workplaces and Scandinavia’s tallest building.

River City’s central location currently has a vacancy rate of 0.8%, while Gothenburg central business district has only 2.1%. On Gothenburg’s outskirts there are several other major commercial and residential projects, such as the expansion of Kallered Shopping Park. For foreign investors, opportunities are plentiful.

Investor advice

Mr Gothberg says that property developers from Stockholm, let alone from abroad, find it difficult to build in Gothenburg. Most foreigners buy ready-built commercial projects, but even then, local companies often outbid outsiders. Tough competition is not unusual within real estate, especially for foreign investors, but Gothenburg’s business environment seems more closed compared with Malmo and Stockholm. The local press has been damning of ‘outsiders’ who have let property standards slip.

This can largely be explained by the decades-long rule of mayor Goran Johansson, who oversaw what many in the city consider to be an anti-business regime. “It became a rather [protectionist] climate,” says Han Wallenstam, CEO of Gothenburg-based property company Wallenstam. “The mayor left in 2009 so that [legacy] is dying. [For example] Volvo is Chinese now.”

However, an easier way in for foreign investors is to buy stocks and shares. Direct investments are simpler in Stockholm and Malmo’s more open markets, suggests Per Gunnar Persson, CEO of local property company Platzer.

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